Liberty Spinning Soon

5/30/2004 8:00 PM Eastern

By: MIKE FARRELL

Liberty Media Corp. has set the date for the spinoff of its international assets, a move that could create a new publicly traded stock worth more than three times the value of Liberty's current shares.

The spinoff of Liberty Media International is set for June 7, when Liberty Media Corp. shareholders of record as of June 1 will receive 0.5 shares of LMI for every Liberty Media share they own.

Afterward, LMI will be a separately traded public company on the NASDAQ stock exchange, under the symbols “LBTYA” for its Class A common shares and “LBTYB” for Class B super-voting shares.

LMI ASSETS

LMI will include Liberty's 54% equity interest in UnitedGlobalCom Inc., its 44% interest in Jupiter Telecommunications Co. Ltd., a 50% stake in Jupiter Programming Co., Ltd., and its 100% interest in Liberty Cablevision of Puerto Rico Inc., as well as smaller interests in cable properties in Argentina, Chile and Ireland.

Liberty first announced the spinoff in March, as part of a plan to separate the company into four different divisions — the Interactive Group, the Networks Group, the Tech/Ventures Group and the International Group.

In the past, Liberty has said that its stock, down about 13% this year, does not accurately reflect the value of its international interests.

Liberty shares were priced at $10.84 each in 4 p.m. trading on May 26.

Prudential Equity Group LLC media analyst Katherine Styponias estimated the LMI shares could be priced as high as $35 per share, based on her sum-of-the-parts analysis of the assets.

According to Styponias, the combined value of J-Com, JPC and UGC is about $5.5 billion. Based on the 150 million in shares outstanding LMI is expected to have post-spinoff, those shares are valued at about $35 each.

In her report, Styponias estimated Liberty Media's stock price could drop as much as $1.83 after the spinoff, to reflect the loss of the international assets.

“However, the decline could be less if the market sees the spinoff as having unlocked some value,” Styponias wrote.

30% DISCOUNT NOW

Liberty Media has been trading at about a 30% discount to its asset value, according to a report by Banc of America Securities cable analyst Doug Shapiro. But that gap should begin to close after the LMI spinoff. Shapiro estimated that the international assets currently represent about $2 per share of Liberty Media's stock price.

Shapiro has set an $11 per share target price on Liberty Media stock ($13 in asset value minus a 15% discount), adding that if the gap does not close, Liberty could goose the shares by aggressively buying back stock or by splitting up the U.S. assets. Shapiro wrote that the share buyback is the more likely scenario.

Shapiro has put a higher price on LMI shares — valuing them at about $40 each based on an asset value of $6 billion and a 15% discount.

Also adding to the value of LMI shares is that Liberty Media chairman John Malone will serve as the unit's chairman, president and CEO, indicating that he will be highly engaged in operations.

“Given his unparalleled track record creating value while consolidating domestic cable, we believe investors will be attracted by the prospect of investing in this international cable roll-up opportunity,” Shapiro wrote.

Styponias also viewed the spinoff as a positive, especially as it could mean LMI will provide additional financial information for its J-Com subsidiary.